CGI Gulf Insights of the Week

  • ByCGI Gulf Insights of the Week
  • Monday, 07 October 2019
  • Published inOctober 2019
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Country Risk Update - Oman

Risk Indicator  - DB4d
Risk Level        - Moderate
Ratings Trend  - Stable

The government is targeting high-end tourism as an area for growth. The ports of Sohar and Salalah are emerging as regionally-competitive infrastructure facilities, soon to be joined by Al Duqm. Data to May shows the fiscal deficit shrinking below 3% of GDP; this comes after six months of data silence.
Market Overview
RBI's repo rate cut to revive growth may cause a slowdown in NRI deposits
Non-resident Indian (NRI) deposits in Indian banks are expected to see a slowdown in the coming months, with concerns of a further cut in the interest rates on these deposits in the wake of India’s central bank slashing repo rate in its latest policy review meeting. The Reserve Bank of India on October 04, 2019 announced 25 basis points in the cut in its repo rate - the rate at which banks borrow from it – in line with its continued efforts to give a renewed push to India’s slowing economy. This was the fifth time in a row RBI cut repo rate this year, bringing down the policy rate by 135 points in total in the last 8 months. The interest rate on NRI rupee deposits have seen a 0.8 to 1 percent reduction in the last one year to 6.5 - 6.6 percent, while the interest rate on US dollar-denominated deposits by expat Indians in Indian banks have seen a cut of about 0.60 percent in the last 6 months to 2.55 percent currently.Gulf-based NRIs account for a major chunk of expat Indian deposits in various Indian banks. NRIs residing in the US, UK, and Europe also hold large-scale deposits in India due to the relatively high-interest rates offered by banks in India. Financial market experts said despite the falling interest rates on their deposits, NRIs do not seem to have many options currently to channelize their savings.
UAE ministry waives fines for thousands of firms, workers
The UAE’s Ministry of Human Resources and Emiratisation announced it is canceling fines issued for violations for over 27,000 companies and 12,000 workers in the country. The ministry said the waiving of fines relates to all those issued before August 1 this year. It said the decision was taken in keeping with the UAE’s Year of Tolerance. Jebel Ali Free Zone waived an estimated AED35 million ($9.5 million) in fines owed by its businesses as part of the UAE government’s designation of 2019 as the Year of Tolerance in May this year.
Zain KSA deploys the Middle East's largest 5G network
Zain Saudi Arabia deployed the region's largest 5G network to date with 2,000 towers covering an area of more than 20 cities in the kingdom. Zain Group said the towers form the first phase of its rollout in Saudi Arabia, which will be followed by a gradual expansion of the network to cover a total of 26 Saudi cities, utilizing 2,600 towers by the end of 2019, serving its 8.3 million customers. The Saudi operation follows the launch of its 5G services in Kuwait, which offer high-speed mobile internet connectivity to users across both countries that expected to be ten times faster than the current 4G on offer. Zain signed a three-year deal with Nokia to roll out its 5G network using the Finnish firm's end-to-end portfolio. “5G will bring substantial change for the kingdom’s telecom industry, creating new business models and unlocking opportunities for many sectors such as financial, ICT, agricultural, tourism, entertainment, automotive, health, education, and public sectors, to name a few," said Zain Vice-Chairman & Group CEO, & Zain KSA Vice Chairman, Bader Al Kharafi.  "The technology is also expected to contribute significantly to the country’s economy, creating thousands of new jobs.” Zain KSA said it's keen to offer 5G services to all business and individual clients through various service packages at competitive rates.
Abu Dhabi issues $10bn multi-tranche bonds
Abu Dhabi successfully priced a $10 billion multi-trance international bond offering in late September, according to the UAE’s state-run WAM news agency. According to WAM, the transactions comprised three tranches: $3 billion, 2.125 percent, due in 2024, which was priced at 65 basis points over US Treasuries, $3 billion, 2.5 percent, due in 2029 and priced at 85 basis points over US Treasuries, and $4 billion, 3.125 percent, due in 2049, which is priced at 110 bps points over US Treasuries. The bonds were well received in international debt capital markets, with the order book peaking at $25 billion with orders coming from over 650 unique accounts. “The success of the issuance is a testament of investor confidence in the government of Abu Dhabi’s economic and political stability and the strong credit story,” said Jassem Mohammed Bu Ataba AlZaabi, the chairman of the department of finance, Abu Dhabi. “We are pleased to witness the achievement of the lowest ever coupons by the government of emirate of Abu Dhabi since the debut issuance in 2007.” Alzaabi added that Abu Dhabi managed to achieve “the tightest 5-, 10-, and a 30-year coupon for a GCC conventional bond. This reflects on the investors’ high confidence in the Emirate’s wise leadership, continuously focused growth strategy as well as its high buffers." The final geographical allocation for the bonds stood at 78 percent from international investors and 22 percent from the Middle East.
Saudi Aramco seeks to refinance $2.2bn of Total JV debt
Saudi Aramco is in talks with banks to refinance $2.2 billion of debt held by its joint venture with Total SA, according to people familiar with the matter. The state-owned oil producer is seeking to cut the borrowing cost on the loans that were used to build the Satorp refinery, the people said, asking not to be identified because the discussions are private. The facility converts fossil fuels into building blocks for plastics. The debt is held by international and local lenders in dollars and Saudi riyals, the people said. Sumitomo Mitsui Banking Corp. and Riyad Bank are advising on the talks, they said. Saudi Arabia is looking to transform its oil-dependent economy by developing new industries and is pushing into petrochemicals as a way to earn more from its energy deposits. Aramco and Total plan to expand the Satorp refinery with a new complex, which will be able to produce 2.7 million tons of chemicals annually once it comes online in about four years. Aramco, as Saudi Arabian Oil Co. is known, owns 62.5 percent of Satorp, while Total holds the rest. Aramco is also working with Total on a plan to develop a local retail fuel distribution company. A spokesman for Aramco declined to comment.
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